Podcast #3: Ian Schrager & the Value of Creativity

“Making the spirit soar and making somebody sort of lift off the ground and fly is about creating magic. People ask me about magic and what it is; it’s very difficult for me to say. If I knew I would write a book and sell the book. And that magic, that very elusive kind of thing, is what I try to create at these hotels.”

- Ian Schrager

As we pulled up to the porte cochère, I remember being thrilled. The entrance to the Delano had a magnitude and energy I’d rarely, if ever, experienced before. The valets were all perfectly dressed in crisp white outfits, the people getting out of their cars were beautifully put together, and the architecture was the perfect combination of classic Art Deco and clean modern lines.

While the arrival alone was magnificent, it wasn’t until I
entered the lobby that I was swept away: fifty-foot ceilings, a
straight-shot visual hundreds of feet from the entrance to the rear
orchard, and charming vignettes of whimsical seating and social
areas throughout. The beauty was unmistakable, and the energy
was so real you could almost drink it. Every step I took built on the
drama of the experience. By the time I exited the lobby and stepped
into the orchard, I felt changed, as if my appreciation for what the
imagination could manifest had been heightened. I didn’t say a
word for ten minutes after I walked outside. I just smiled, completely
satisfied by what I had just consumed.

While the experience was powerful, as in many meaningful moments, I wasn’t fully aware of how this night would affect me. I definitely wasn’t aware I would end up spending over a decade of my life involved in different ways with this company, crafting new ideas, creating even more magical experiences. What I did know, without a doubt, was that I had tasted fully realized creative potential. And once I knew it existed, how could I live without realizing my own? So I began my research at the source: Ian Schrager, the iconoclastic creator of Delano.

Schrager, like Maslow, was born in Brooklyn to a working-class family. Unlike Maslow, he had a close relationship with his parents, especially with his father, Louis, who instilled in him a strong value system. After spending his youth in East Flatbush, he headed off to Syracuse University in 1964. That’s where he met Steve Rubell, another Brooklyn product, who would become his lifelong friend and business partner. An outgoing, flamboyant character, Steve was a couple of years older than Ian, but the two meshed perfectly. As Ian tells it, “We were dating the same girl, and from the way we went about competing for her, we came to respect and like each other. And the friendship just got closer and closer and closer. I would say that from the end of 1964 until Steve died in 1989 I spoke to him every single day.”

After they graduated, Ian went on to practice real estate law,
and Steve started a chain of steakhouses and became Ian’s first
client. It was about this time that Ian and Steve started going to
clubs together, and they were astonished and inspired by what they
saw. For the first time they were exposed to the mixing of different
groups of people, the breaking down of social barriers—and the
willingness of people to stand in line for the chance to spend their
money. This was when Ian began to sense his desire to create. After
a couple of months of going out and throwing a few parties of their
own, Ian and Steve decided to open their own disco—in Queens, a
borough of New York City known more for slicked-back hair and
slice shops than for chic parties and celebrities.

After their first club, Enchanted Garden, was a financial success, Ian and Steve soon wanted to take the next big step: a club in Manhattan. By early 1977, they’d signed the lease for a former CBS studio and opera house on West Fifty-Fourth Street. It took them six weeks and $400,000 to transform the old theater into a nightclub. They kept much of the original infrastructure and used it to rig lighting that would constantly change the feel and create the energy needed to make the club a transformative experience.

As Schrager once put it, “With a nightclub, you have no real
discernible product. You have the same music and the same alcohol
as everybody else, and yet you have to create magic night after
night in hopes of distinguishing yourself.” On April 26, 1977, Studio
54 opened, and the world of nightlife would never be the same.

For the thirty-three months that followed, Studio 54 was the center of the universe. Ian, Steve, and their team would combine their unlimited imagination with hard work and execution to create that magic night after night. There were countless legendary moments: Bianca Jagger riding into the club on a white horse for her birthday celebration; a nineteen-year-old Michael Jackson on the dance floor with Andy Warhol, Liza Minelli, Steven Tyler, Brooke Shields, and the Village People; elaborate theme parties celebrat- ing everyone from Karl Lagerfeld to Elizabeth Taylor. The regulars at 54 included Halston, Mick Jagger, Jerry Hall, Debbie Harry, Grace Jones, Calvin Klein, Elton John, Tina Turner, Divine, Margaret Trudeau, Francesco Scavullo, Truman Capote, Margaux Hemingway, Freddie Mercury, Tommy Hilfiger, Mikhail Baryshnikov, Diana Ross, Al Pacino, Cher, Bruce Jenner, David Bowie, Iman, Salvador Dali, Diana Vreeland, John Travolta, Beverly Johnson, Lauren Hutton, Andre Leon Talley, Diane von Furstenberg, and Jacqueline Kennedy Onassis. Studio 54 was surreal. It became more than a place—it was a moment etched in time, capturing the energy of the sexual revolution in unbridled freedom and hedonism. Studio 54 was the apogee of escapism.

Ian and Steve weren’t ready for the sudden explosion of energy
and material success and let it inflate their egos. In December
1978, Steve was quoted in a newspaper saying that Studio 54 had
made $7 million in its first year of operation and “only the Mafia
made more money.” Shortly thereafter, the nightclub was raided,
and Steve and Ian were arrested for skimming $2.5 million without
paying taxes. Charged with tax evasion, obstruction of justice, and
conspiracy, they were sentenced to three and a half years in prison.
In a blink of an eye, they had gone from the top of the world to the
lowest place they could ever imagine.

After prison, Steve and Ian were motivated to regain what they’d lost. They opened another nightclub, Palladium, in Manhattan’s historic Academy of Music building. Ian enlisted world-renowned Japanese architect Arata Isozaki to reimagine the space, and they made art the focal point of the experience, with installa- tions by Jean-Michel Basquiat, Julian Schnabel, Kenny Scharf, Keith Haring, and Francesco Clemente. It was another legendary success. While Steve was passionate about recapturing the days of 54, Ian saw another club as repeating themselves. “If you repeat yourself,” he stated, “there isn’t any point. I’m always looking for something else—trying to pull a rabbit out of a hat.” To him, Palladium was a stopover on the way to the duo’s next big challenge: hotels.

With their nightclubs, Ian and Steve had to create something out of nothing. While people love nightclubs, there’s no practical need a club fulfills. Going to one is an act of desire, a want, for escape or social validation—it’s all emotional. On the other hand, people need hotels; they need a place to stay, so there’s a practical value. Now, instead of pulling a rabbit out of the nightclub hat every night, Ian and Steve had to figure out how to reinvent the hotel experience by adding emotional elements. “Hotels,” Ian once said, “are in certain important ways, nightclubs for grown-ups….

So when Steve and I went into the hotel business, where we had
a real commodity that people wanted, we didn’t rely on that. Our
approach wasn’t, well, we have a bed. Our approach was, we want
to make it something magical.”

And they did. Ian and Steve knew there were no hotels cater-
ing to the taste and lifestyle of their clientele. It was obvious to
them that the hotel business was stale with sameness; if they could
infuse art and lifestyle into this segment of commerce, they would
disrupt the industry.

Their first hotel, Morgans, opened in 1984, and it was a revelation. They’d hired a designer, Andrée Putman, who had never done a hotel before, and gave her the freedom to design the experience without any rules. Every detail was considered, from art in the rooms (one-of-a-kind photographs by Robert Mapplethorpe), to the most chic bars and restaurants and avant-garde public spaces. Steve described their new hotel by saying that if a Holiday Inn or a Marriott were like Macy’s or Bloomingdale’s, their new hotel was like a Madi- son Avenue boutique. And just like that, the boutique hotel was born.

Following the success of Morgans, Ian went on to open the Royalton and Paramount hotels, introducing the concept of “lobby socializing,” which made the lobby a dynamic city social center, and “cheap chic”—the idea of affordable luxury in a stylish environment. Next, Schrager invented the “urban resort” with Delano Miami—ironically, the hotel his parents had brought him to on their first family vacation many years before. With each hotel, he changed the per- spectives of guests and the hospitality industry on what was possible.

Since then, Ian has continued his groundbreaking, space-de- fining work with Mondrian Los Angeles, Hudson New York, Clift San Francisco, and St. Martins Lane and Sanderson in London. More recently, he launched his Edition hotel brand in partnership with Marriott, his own cheap-chic brand Public hotels, and a slew of residential real estate projects in downtown Manhattan. He has collaborated with some of the most creative designers, artists, and restaurateurs in the world, including Philippe Starck, Julian Schnabel, Herzog de Mueron, John Pawson, Yabu Pushelberg, Jean- Georges Vongerichten, and many more. Travel & Leisure magazine summed it up perfectly by saying, “Ian Schrager has done more to bring design to the travel experience than any other living person—single-handedly reinventing the hotel as a site of electrifying cultural significance.”

While many say Schrager’s work is about design, it isn’t—it’s
about ideas and experiences. Ian uses the power of his ideas to
tap into what he calls the “collective unconsciousness, the ethereal,
elusive, and hard-to-define magic and energy.” He understands the
power of this intangible, emotional place and uses it to connect
deeply with his customers. He knows that “the way a product makes
you feel is more important than how it looks. The goal is to create
experiences that people will remember, to touch them in emotional
and visceral ways, to lift their spirits, to assault their senses, and to
wow them in tasteful ways.” But just as important, Schrager under-
stands that an amazing experience can’t be created from ideas
alone, knowing that “good execution is just as important as a good
idea.” And he has consistently manifested his creative potential
because he has regularly married the four key elements that create
value in our new age: purpose, creativity, execution, and emotion.

Ian Schrager creates because he has to, not because he wants
to. He isn’t competing against anyone except himself. As he says:
“It is never about the money—but instead to get people even more
excited than they were the last time.” And with a little help from his
friend, that’s how he unlocked his creative potential.

Shifting Perception

Brand is just a perception, and perception will match real-
ity over time. Sometimes it will be ahead, other times it will
be behind. But brand is simply a collective impression some
have about a product.

—Elon Musk

Great ideas have the power to shift perception to create value where it didn’t exist before. Remember when I mentioned earlier that when I created my pop-up restaurants, I was concerned people would realize they were just catering events, repackaged and marketed from a different perspective? Well, let’s explore this phenomenon a little more.

For a number of years, I worked at Morgans Hotel Group, the
company founded by Ian Schrager. As we just explored, Schrager
gets credit for originating lifestyle, or boutique, hotels. Such hotels
have a distinct design, unique story, and creatively programmed
public spaces such as restaurants, pools, spas, and lobbies. But
all full-service hotels have always been designed and made up of
rooms and public spaces. What Schrager did when he developed
the lifestyle hotel was apply his creativity—through design, story-
telling, and programming—to shift the customer’s perspective and
produce significant value. After all, many lifestyle hotels are just
underperforming hotel assets that have been repositioned using
these creative elements.

After Morgans, I joined a leader in the coworking field. Coworking is an evolving idea and exploding industry, but at a basic level it can be defined as an enterprise that offers shared workplaces for people—freelancers, employees of startups, small and large companies—attracted to the community the space creates and by the coworking company’s philosophy, story, and creativity. Instead of leasing buildings in a traditional manner to multiple larger tenants, coworking companies lease entire structures and then sell these leases at a higher rate to members, a/k/a tenants. A change in use, not physical form. Combine that with the intangibles of inventive branding and experiential activation, and you’ve transformed one of the largest industries in the world—commercial real estate—simply by changing the way people perceive it.

But does that kind of thing last? Is it sustainable? Well, let’s look
at the facts. In the years after my first pop-up, pop-ups became a
global craze, right alongside food trucks. Pop-ups are being regularly
produced by restaurant companies, magazines, culinary collectives,
hotel groups, and stadiums. Additionally, the hospitality industry
has taken the concepts of supper clubs, guest chefs, and theme
dinners, and stitched them into the playbook guiding the operations
of restaurants and other food and beverage operations. Conclusion:
pop-ups are now part of the hospitality vernacular, serving multiple
functions, from stand-alone profitable businesses to driving extra
profits for existing restaurants to testing new concepts.

Next up, lifestyle hotels. Since the concept arrived in 1984, it has revolutionized the hotel and hospitality industry. After Ian Schrager and Morgans, we saw W Hotels, Joie de Vivre, Kimpton, André Balaz, Viceroy, Ace, and dozens more brands and thou- sands of independent hotels. As of 2015, thirty years after their creation, lifestyle hotels represented over twenty percent of the total hotel industry. Every major hotel company now has one or more lifestyle-brand offerings. Not only that, but the segment has completely changed the way non-lifestyle hotels operate, forcing the hand of the incumbents to tell better stories about who they are, offer more interesting food, beverage, and public space experiences, and implement specific design perspectives that appeal to their target clientele. And the move toward a more lifestyle-centric approach to hospitality has bled into other industries like residential apartments, fitness, and even retail.

As for coworking, while the story is still being written, there are tens of billions of dollars being invested in the industry, multiple players in every major city in the world, and a movement of free- lancers, entrepreneurs, and large companies looking for a better way to work. The complete integration of work and leisure is upon us, and coworking is one of the key solutions satisfying this cultural shift. Again, it principally offers a change in usage and a way to identify emotionally as part of a community, not a new technology or practical offering. This makes coworking a shift very much driven by branding, storytelling, and perception. Who knows how this story will end? But it seems like the way we work in the future will be changed by the effect coworking has had on the collective consciousness.

This same theory of shifting perception applies to individuals. For years, celebrities have had armies of people helping them craft very particular visions of who they are, which has generated tremendous value. For example, female teen stars are told to embrace a sexier image and take edgier roles as they get older, so their fans will begin to perceive them as adult actors and follow them as they move to the next level of their careers. Tom Cruise’s team carefully crafted his image for decades, which made him wealthy and powerful. Then one day he decided to go off script on Oprah’s show, jump on her couch, and make some controversial comments, which dented his carefully curated image, and cost him millions in future earnings. As the Huffington Post put it, “Though Cruise’s name is still a big box-office draw, these days, he is better known for being an outspoken advocate for Scientology and for his public antics. The couch jump marked the first shift in Tom Cruise’s image away from the heartthrob he’d been.” Over time Cruise regained some of his lost cultural capital, but the impact was significant, and it’s a vivid example of perception impacting value.

The thing is, in the Age of Ideas, regular people are able to harness the power of perception in the same way celebrities and big companies have for years. Whether on LinkedIn, Facebook, Instagram, or personal blogs, you can influence your value by affect- ing how people perceive you. And the same way an entrepreneur can change the value of a building or event by changing people’s perception of it, you too can change people’s perception of you through authentic storytelling.

It’s critical we understand and learn from the above examples. We exist in a time that values creativity more than ever. By shifting the perception of a person, product, or place, you will significantly impact their value and how the market interacts with them. Perception is closer to reality than ever before, and your ability to positively shift perception directly correlates to how much value you can create in the Age of Ideas.

Creative Potential

Let’s discuss creativity for a moment. Creativity is that special
something. It can take you from good to great, from want to need,
from admiration to infatuation. It is intangible, emotional, and
premium-worthy. It’s honest. It’s simple. It’s generous. It’s beautiful
to watch and effortless to enjoy. Once you get in touch with your
creativity, nothing else is ever the same. It is an energy deep within,
one that connects us all.

The way to create value in the Age of Ideas is to identify, manifest, and share your creativity.

A little far out for you? Let me elaborate.

If you’ve ever fallen in love—and I hope you have—you’d know that it is quite an unexplainable emotion. There’s no questioning it when it happens. When you feel love, it’s unmistakably present, and when you don’t, there’s no doubting its absence.

When a product, a person, or an organization radiates cre-
ativity, it is very similar. There’s no doubt that something special is
happening or someone special is present. An emotional reaction
takes place that binds the energy of these experiences to your soul
and leaves you wanting more, not much different from when you’re
in love. That’s why you sometimes hear people professing strong
feelings for their new electronic gizmo, a piece of art, their favorite
hotel, an item of clothing, or a great performer. The creative energy
that person or product generates makes a tremendous connection
with the consumer—so much so that they fall in love with it.

Your creative potential is fully unleashed when you manifest
the highest and purest form of your purpose, what you stand for,
what you believe in, what you’re best at.

Creativity, like love, is entirely emotional, meaning it doesn’t
have a physical presence. That’s what makes it so extraordinary, and
yet so difficult for so many to believe in or understand. It makes a lot
of very smart people uncomfortable; they have an intense desire for
creativity in their lives or businesses, but they can’t just purchase it
like a material thing or control it like a process in a factory.

To manifest your creativity you must believe deeply in the
emotional elements and patiently invest in them. Once you find your
creativity, it must be encouraged and enhanced, not controlled. The
best of the best—the Apples, Nikes, Michael Jordans, Andy Warhols,
Meryl Streeps of the world—have it; they protect it, believe in it, and
as long as they stay true to their essence they’ll continue to reap the
benefits that come with creative thinking and living.

The Value of Creativity

While measuring an individual or organization’s creativity is difficult,
there’s no doubting that the presence of creativity has tremendous
value. Consider the following questions:

How much is a two-hundred-dollar Nike sneaker worth if you
remove the Swoosh? Twenty dollars? Ten?

What premium would you pay for a pork bun made by David
Chang? Sushi made by Nobu? Pasta made by Massimo Bottura?

Why do people pay extra to stay in an Ace Hotel instead of a Holiday Inn? Or fly JetBlue instead of American?

Why does a cotton sweatshirt with a Supreme logo resell on the secondary market for over $500, when they sell at retail for just $125? Or, at a simpler level, do Windex and Fantastic really clean better than the generic, chainstore versions? Do they clean fifty cents better? A dollar better?

The value of creativity is the difference between the branded
price and the commodity price of a product, service, idea, or person.

Branded Price – Commodity Price =
Value of Creativity

Let’s discuss our Swoosh-less Nike sneaker for a moment. My
guess is that if you removed the branding from a pair of Nike Dunk
sneakers, they would be worth no more than twenty-five percent of
their retail price. That means that at least seventy-five percent of
the value of a Nike sneaker is tied up in the emotional elements you
can’t see or touch, the intangibles. But just because you can’t see
them or touch them doesn’t mean they aren’t real.

For a parallel example, let’s look at Kanye West’s relationship with Adidas. Kanye has little or no athletic prowess—he’s a musician, a tastemaker, a hype man. Whatever you may think of Kanye, he gets people talking and has been able to use his brand to create value for his partners. And that’s exactly what he did when he designed a line of sneakers for Adidas, the Yeezy Boost.

In February 2015, a limited run of his shoes sold out within ten
minutes at a retail price of two hundred dollars. The shoes were
then released to a wider audience a month later and once again
sold out in record time. This is where things start to get interesting.
According to Complex magazine, in the following quarter the Yeezy
Boost accounted for $2.3 million in sales on eBay, three times the
gross sales of its closest competitor, for an average price of $751 per
pair. Let’s generously assume it cost Adidas fifty dollars per pair to
produce and market a pair of Yeezy Boost. If that’s the case, Kanye
West’s creativity is worth $701 per pair, and that doesn’t include the
halo value to the overall Adidas brand.